Assisted Living and Pharmacy Service Arrangements

Assisted Living and Pharmacy Service Arrangements at a Glance

Arrangements between assisted living facilities and pharmacy services are subject to intense scrutiny under federal anti-kickback and Stark Law provisions. These laws aim to prevent improper financial incentives that could influence referrals of healthcare services covered by federal health care programs. Given the potential for conflicts of interest, such as when a facility benefits financially from a pharmacy's services, legal compliance is critical to avoid felony charges and civil penalties.

The Legal Framework

The federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), prohibits the knowing and willful offering, paying, soliciting, or receiving of remuneration to induce or reward referrals of items or services payable by a federal health care program. This statute applies broadly, including to arrangements between assisted living facilities and pharmacies, especially when those arrangements involve financial incentives tied to referrals.

In addition, the Stark Law, 42 U.S.C. § 1395nn, imposes separate restrictions on physician self-referrals for designated health services to entities with which the physician has a financial relationship. This law applies even when no federal program is involved, and it operates as a strict-liability statute administered by the Centers for Medicare & Medicaid Services (CMS).

Both the Anti-Kickback Statute and Stark Law include exceptions and safe harbors outlined in 42 C.F.R. § 1001.952. These safe harbors cover categories such as investment interests, space rental, equipment rental, personal services and management contracts, referral services, group purchasing organizations, and electronic health records items and services. However, arrangements that do not meet the criteria of these safe harbors may be subject to legal scrutiny.

Enforcement and Cases

Facility-pharmacy preferred-provider arrangements are a recurring area of Anti-Kickback Statute scrutiny in long-term care settings. While no specific cases are cited here, enforcement actions have targeted arrangements where financial incentives are tied to referrals or where compensation structures fail to meet safe harbor criteria. These arrangements are often reviewed closely by the Office of Inspector General (OIG) due to the potential for improper influence on healthcare decisions.

The Federal Overlay

The federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), makes it a felony to knowingly and willfully offer, pay, solicit, or receive remuneration to induce or reward referrals of items or services payable by a federal health care program. The Stark Law, 42 U.S.C. § 1395nn, separately prohibits physician self-referrals for designated health services payable by Medicare or Medicaid, on strict-liability terms. Both regimes carry safe harbors and exceptions published at 42 C.F.R. § 1001.952. State referral and fee-splitting statutes operate alongside these federal prohibitions and can apply even where no federal program payment is involved.

Reading the Research Desk

For further insight, explore related topics on this site, including the AKS Defense Research Topics desk, an in-depth explanation of the Anti-Kickback Statute, a review of safe harbors and common pitfalls, an analysis of how AKS and Stark Law overlap, recent decisions, and frequently asked questions.